A dispute panel formed under the U.S.-Mexico-Canada Agreement (USMCA) has ruled that Canada’s allocation of lower tariff rates to dairy importers does not restrict access to the market. This decision comes after the U.S. argued that Canada’s approach breached trade commitments. Last year, Canada revised its tariff rate quota allocation system following a dispute panel’s finding that it was inconsistent with USMCA commitments. The recent ruling means Canada is not required to make further changes.
Access to Canada’s tightly-regulated dairy market was a significant aspect of the USMCA, making this ruling a “surprising setback” for U.S. dairy industry groups.
Michael Dykes, President and CEO of the International Dairy Foods Association, expressed disappointment with the panel’s decision, stating, “We are completely stunned and deeply disappointed by this panel’s failure to defend even the most basic rights outlined in USMCA.”
The key issue at hand was whether Canada favored its own processors when determining who could secure lower tariff rates under its allocation system. While the U.S. argued that the system favored processors and hindered other importers, the panel concluded that Canada’s market-based approach reflected the country’s dairy market rather than being a strategy to exclude other importers. Additionally, the panel noted that Canada was not obligated to provide rate allocations to every type of applicant.
The dispute panel, consisting of three members, included one dissenter who believed that Canada should not exclude retailers and other importers from applying for import quotas. There are no mechanisms for appeal if a country disputes a panel’s findings.
U.S. Trade Representative Katherine Tai stated, “While the United States won a previous USMCA dispute on Canada’s dairy TRQ allocation measures, Canada’s revised policies have still not fixed the problem for U.S. dairy farmers.” She emphasized the commitment to addressing the issue with Canada and using available tools to enforce trade agreements.
Dairy groups have called on the Biden administration to reconsider its trade policy agenda in response to the ruling, which has diminished the USMCA’s value proposition for the industry. Dykes urged the United States to lead in negotiating trade agreements that uphold rules-based trade principles.
Discover in-depth supply chain report news insights at The Supply Chain Report. For international trade tools, see ADAMftd.com.
#USMCA #CanadaDairy #TradeDispute #DairyIndustry #TariffRates #InternationalTrade #TradeAgreement #KatherineTai #DairyFoodsAssociation #MarketAccess #USMCAChallenges #BidenAdministration #TradePolicy
